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India’s MSP Programme
Context
The Union Cabinet recently announced MSP for 14 Kharif season crops. This includes important crops like paddy, ragi, bajra, jowar, maize, and cotton.
What is MSP?
- MSP stands for Minimum Support Price. It is the price at which the government buys crops from farmers, ensuring them a stable income and protecting them from market fluctuations.
- MSP was introduced in 1965 to safeguard farmers' interests.
- Role of CACP: The Commission for Agricultural Costs and Prices (CACP) recommends MSP based on factors like production costs, demand-supply dynamics, and market prices.
- Government Decision: The Cabinet Committee on Economic Affairs, chaired by the Prime Minister, makes the final decision on MSP after considering CACP's recommendations.
- Purpose of MSP
- Income Security: MSP guarantees farmers a minimum price for their produce, ensuring stable income.
- Price Stability: It stabilizes prices in the market by setting a floor price below which market prices are not allowed to fall.
Issues and challenges pertaining to MSP
While it remains crucial for food security and supports small farmers, debates persist over its impact on crop choices, market distortions, and its compatibility with WTO regulations.
- Market Distortions: MSP influences farmers' crop choices and can lead to overproduction of certain crops, affecting market dynamics and agricultural sustainability.
- Government Expenditure: Significant expenditure, exceeding Rs 1.7 trillion for paddy and wheat alone in recent years, raises concerns about fiscal sustainability and market distortions.
- WTO Dispute: India's MSP system has faced criticism at the WTO for potential market distortion. Despite this, it remains integral to addressing farmer welfare, especially in light of farmer suicides and agricultural crises exacerbated by climate change.
There is a need for urgent reform to make MSP more effective and sustainable. This includes revisiting subsidy structures, enhancing productivity, and possibly limiting MSP to prevent market distortions.
Fact Box:About CACP
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PYQMains Q: What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low-income trap? (2018) Prelims Q1. Consider the following statements: (2020)
Solution: (d) Q2. Consider the following statements: (2023)
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